USX Corp. v. Adriatic Insurance , 345 F.3d 190 ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
9-25-2003
USX Corp v. Adriatic Ins Co
Precedential or Non-Precedential: Precedential
Docket No. 00-3424
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PRECEDENTIAL
Filed September 25, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-3424
USX CORPORATION; BESSEMER AND
LAKE ERIE RAILROAD COMPANY
v.
ADRIATIC INSURANCE COMPANY; AG GROUP, The
Successor in Interest to SECURITAS A.G.; AIU
INSURANCE COMPANY; ALLIANZ UNDERWRITERS
INSURANCE COMPANY; ALLIANZ VERSICHERUNGS A.G.;
ALLSTATE INSURANCE COMPANY, The Successor in
Interest to NORTHBROOK EXCESS & SURPLUS
INSURANCE COMPANY and NORTHBROOK INSURANCE
COMPANY; AMERICAN INSURANCE COMPANY;
AMERICAN REINSURANCE COMPANY; AON
CORPORATION, The Successor in Interest to UNION
INDEMNITY INSURANCE COMPANY OF NEW YORK;
ARKWRIGHT MUTUAL INSURANCE COMPANY; ATLANTA
INTERNATIONAL INSURANCE COMPANY; BIRMINGHAM
FIRE INSURANCE COMPANY; CENTENNIAL INSURANCE
COMPANY; CONTINTENTAL CASUALTY COMPANY;
CONTINTENTAL INSURANCE COMPANY; DANIELSON
NATIONAL INSURANCE, The Successor in Interest to the
MISSION INSURANCE COMPANY; EMPLOYERS MUTUAL
CASUALTY COMPANY; EUROPEAN GENERAL
REINSURANCE COMPANY OF ZURICH; EVANSTON
INSURANCE COMPANY; EXCESS INSURANCE COMPANY,
LTD.; FEDERAL INSURANCE COMPANY; FIREMAN’S
FUND INSURANCE COMPANY; FIRST STATE INSURANCE
COMPANY; GOVERNMENT EMPLOYEES INSURANCE
COMPANY; GRANITE STATE INSURANCE COMPANY;
HAFTPFLICHTVERBAND DER DEUTSCHEN INDUSTRIE
2
VERSICHERUNGSVEREIN A.G.; HARTFORD ACCIDENT
AND INDEMNITY COMPANY; INSURANCE COMPANY OF
THE STATE OF PENNSYLVANIA; INTERNATIONAL
INSURANCE COMPANY; LEXINGTON INSURANCE
COMPANY; NATIONAL CASUALTY COMPANY; NATIONAL
UNION FIRE INSURANCE COMPANY OF PITTSBURGH,
PA; NORTHBROOK EXCESS & SURPLUS INSURANCE
COMPANY; NORTHBROOK INSURANCE COMPANY;
ROTTERDAMSE ASSURANTIEKAS N.V.; ST. PAUL
SURPLUS LINE INSURANCE COMPANY; SENTRY
INSURANCE, A MUTUAL COMPANY, As Assumptive
Reinsurer of the GREAT SOUTHWEST FIRE INSURANCE
COMPANY; SWISS REINSURANCE COMPANY; TUDOR
INSURANCE COMPANY; TWIN CITY FIRE INSURANCE
COMPANY; UNITED STATES FIRE INSURANCE
COMPANY; VANLINER INSURANCE COMPANY, The
Successor in Interest to The GREAT SOUTHWEST FIRE
INSURANCE COMPANY; WESTCHESTER FIRE
INSURANCE COMPANY; ZURICH INSURANCE COMPANY;
ZURICH INTERNATIONAL LTD; CERTAIN OF THE
UNDERWRITERS AND INTERNATIONAL INSURERS
SUBSCRIBING TO LLOYD’S POLICY NOS. 77DD2126C,
78BH3189, 78BH3190, 78BH3191, PY021577,
PY021378/78DD1459C, 79BH1269, 79BH1270,
78DD1406C, 79BH1271, 79BH1272, 80DD19C/PY021379,
79BH5311, 79BH5312, PY135179, PY021379A,
80BH0659, 80BH0660, 80BH0661, 80BH0662,
PY172180/80DD2562C, PY172280/80DD2563C,
HA081280/LBM/1HB06910, 2KA42270/HA081281/LBN,
KY019382, KY019482, KY021982, AND KY021882;
ICAROM, Formerly known as INSURANCE CORPORATION
OF IRELAND; ICAROM plc, formerly known as
INSURANCE CORPORATION OF IRELAND
USX Corporation and Bessemer and Lake Erie
Railroad Company
Appellants
3
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civ. No. 95-00866)
Honorable Gustave Diamond, District Judge
Argued April 3, 2001
Reargued August 1, 2003
BEFORE: ROTH, STAPLETON, and GREENBERG,
Circuit Judges
(Filed: September 25, 2003)
Lawrence E. Flatley
George L. Stewart II
Traci Sands Rea
John A. Camp
Reed Smith
435 Sixth Avenue
Pittsburgh, PA 15219
J. Michael Jarboe
(argued on April 3, 2001,
and August 1, 2003)
Law Department of U.S. Steel
Corporation
600 Grant Street, 15th Floor
Pittsburgh, PA 15219
Attorneys for Appellants USX
Corporation and Bessemer and
Lake Erie Railroad Company
4
Martin R. Baach
Stephen H. Marcus
Geovette E. Washington (argued
on August 1, 2003)
Baach, Robinson & Lewis
One Thomas Circle, Suite 200
Washington, DC 20005-5803
Bernard D. Marcus
Robert L. Allman, II
Marcus & Shapira
One Oxford Centre, 35th Floor
301 Grant Street
Pittsburgh, PA 15219-6401
James P. Davenport (argued
on April 3, 2001)
Nussbaum & Wald
One Thomas Circle
Suite 200
Washington, DC 20005
Attorneys for Appellees Certain
Underwriters at Lloyd’s, London
and Certain Companies in the
London Market
William H. Briggs, Jr.
Leslie S. Ahari
Benjamin C. Eggert
Ross, Dixon & Bell
2001 K Street, N.W.
Washington, D.C. 20006-1040
Attorneys for Appellees Continental
Casualty Company and Continental
Insurance Company
5
Stephen A. Cozen (argued on
April 3, 2001, and August 1, 2003)
Jay M. Levin
Gaele McLaughlin Barthold
Cozen & O’Connor
1900 Market Street
The Attrium
Philadelphia, PA 19103
Attorneys for Appellees AIU
Insurance Company; Birmingham
Fire Insurance Company; Granite
State Insurance Company;
Insurance Company of the State of
Pennsylvania; Lexington Insurance
Company; National Union Fire
Insurance Company of Pittsburgh,
Pennsylvania; and Certain of the
Underwriters at Lloyd’s
Wendy L. Mager
Grayson Barber
Smith, Stratton, Wise, Heher
& Brennan
600 College Road East
Princeton, NJ 08540
Anthony W. Hinkle
Cipriana & Werner
1100 Two Chatham Center
112 Washington Place
Pittsburgh, PA 15219
Attorneys for Appellee Centennial
Insurance Company
R. Kenneth Willman
Willman & Arnold
705 McKnight Park Drive
P.O. Box 15276
Pittsburgh, PA 15237
Attorneys for Appellees Arkwright
Mutual Insurance Company and
Employers Mutual Casualty
Company
6
Richard S. Dorfzaun
David B. Fawcett, Jr.
Dickie, McCamey & Chilcote
Suite 400, Two PPG Place
Pittsburgh, PA 15222-5402
Attorneys for Appellee National
Casualty Company
Thomas V. Gebler, Jr.
Robb, Leonard & Mulvihill
Suite 2300 One Mellon Bank Center
Pittsburgh, PA 15219
Attorneys for Appellee Federal
Insurance Company
Roderick T. Dunne
Karbal, Cohen, Economou,
Silk & Dunn
200 South Michigan, 21st Floor
Chicago, IL 60604
James A. Mollica
Mollica & Murray
1305 Grandview Avenue
450 Trimont Plaza
Pittsburgh, PA 15211
Attorneys for Appellee Evanston
Insurance Company
Elit R. Felix II
Margolis Edelstein
The Curtis Center, 4th Floor
Independence Square West
6th and Walnut Streets
Philadelphia, PA 19106-3304
Attorneys for Appellees Allianz
Underwriters Insurance Company;
Atlanta International Insurance
Company; Tudor Insurance
Company; and Atlanta
International Insurance Company
7
Robert A. Arcovio
Judy Thomas
Margolis Edelstein
1500 Grant Building
Pittsburgh, PA 15219
Attorneys for Appellees American
Insurance Company and Fireman’s
Fund Insurance Company
C. Leon Sherman
C. Leon Sherman & Associates
20 Stanwix Street, Fifth Floor
Pittsburgh, PA 15222
George R. Hardin
Hardin, Kundla, McKeon, Poletto &
Polifroni
673 Morris Avenue
P.O. Box 730
Springfield, NJ 07081
Attorneys for Appellees
International Insurance Company;
United States Fire Insurance
Company; and Westchester Fire
Insurance Company
William Savino
Michael Cassell
Chris Fichtl
Rivkin, Radler
10th Floor
EAB Plaza
West Tower
Uniondale, NY 11566
Attorneys for Appellees American
Reinsurance Company; Government
Employees Insurance Co.; Sentry
Insurance Company, Assumptive
Reinsurer of the Great Southwest
Fire Insurance Company; and
Vanliner Insurance Company, the
Successor in Interest to the Great
Southwest Fire Insurance Company
8
Jeffrey Bouslog
Oppenheimer, Wolff & Donnelly
Plaza VII, Suite 3400
45 South Seventh Street
Minneapolis, MN 55402-1609
Kevin P. Lucas
Manion, McDonough & Lucas
600 Grant Street
Suite 882
Pittsburgh, PA 15219
Attorneys for Appellee St. Paul
Surplus Line Insurance Company
Louis C. Long
Meyer, Darragh, Buckler, Bebenek
& Eck,
2000 Frick Building
Pittsburgh, PA 15219
Attorneys for Appellee Zurich
Insurance Company
Arthur J. Liederman
Morrison, Mahoney & Miller
100 Maiden Lane
New York, NY 10038
Attorney for Appellees Adriatic
Insurance Company; Allianz
Versicherungs A.G.; European
General Reinsurance Company of
Zurich; Haftpflichtverband der
Deutschen Industrie
Versicherungsverein A.G.; and
Swiss Reinsurance Company
9
Allen D. Windt
Suite 230
27 West Atkins Avenue
Ardmore, PA 19003
Attorney for Appellee Excess
Insurance Company, Ltd.; First
State Insurance Company; Hartford
Accident & Indemnity Company;
and Twin City Fire Insurance
Company
OPINION OF THE COURT
GREENBERG, Circuit Judge.
I. INTRODUCTION
This matter comes on before this court on appeal from a
summary judgment entered for the defendants and from
orders denying motions to remand this insurance policy
coverage case to the state court in which it had been
initiated. This litigation, though not reaching trial, has been
protracted and has followed complex underlying
proceedings in other consolidated cases. Though, as will be
seen, we summarily will resolve the substantive issue
before us which we find not to be difficult, we nevertheless
set forth the background of the case in some detail.
Appellants USX Corporation and Bessemer and Lake Erie
Railroad Company (“B&LE”), its subsidiary at the times
material to this action (together herein usually called
“USX”), have sought indemnification from the
approximately 50 appellees (“insurers”) under umbrella
liability insurance policies the insurers issued to USX.1
These policies were developed for a program which USX
initiated in the 1970s when, in consultation with its
domestic insurance broker, Marsh & McLennan, it
1. USX’s most recent corporate disclosure statement under Fed. R. App.
P. 26.1 indicates that B&LE is now a wholly owned subsidiary of Great
Lakes Transportation, LLC, a Delaware limited liability company.
10
determined to obtain insurance for catastrophic liabilities.
Ultimately USX obtained liability insurance in furtherance
of this program covering seven periods from May 12, 1977,
to April 1, 1983. From May 12, 1977, through December 1,
1979, the programs included between four and six layers of
insurance providing $128.1 million to $151 million of
coverage for liability imposed in excess of a $50 million self-
insured retention. From December 1, 1979, to April 1,
1983, the programs involved between six and seven layers
of insurance providing between $275 million and $325
million of coverage in excess of a $25 million self-insured
retention. The multi-layered umbrella policies included
broad comprehensive coverage based on London umbrella
insurance policies and provided:
Underwriters hereby agree, subject to the limitations,
terms and conditions hereinafter mentioned, to
indemnify the Assured for all sums which the Assured
shall be obligated to pay by reason of the liability:
(a) imposed upon the Assured by law . . . for damages
on account of:
(i) Personal Injuries
(ii) Property Damage
(iii) Advertising Liability,
caused by or arising out of each occurrence happening
anywhere in the world.
Joint App. at 133.2 The term “Personal Injuries” was
defined as:
bodily injury . . . mental injury, mental anguish, shock,
sickness, disease, disability, false arrest, false
imprisonment, wrongful eviction, detention, malicious
prosecution, discrimination, humiliation; also libel,
slander or defamation of character or invasion of rights
2. USX explains that the various policies issued were “in all respects
material to this dispute . . . identical to the 1971 London umbrella form.”
Br. at 10-11. In this opinion we refer to the original appendix filed in this
court as “Joint App.” and the appendix filed after the remand on the
jurisdictional issue that we describe below as “Juris. J.A.”
11
of privacy, except that which arises out of any
advertising activities.
Joint App. at 135. The policies, however, excluded coverage
for liability arising out of discrimination based on race,
creed, color or national origin. “Advertising liability”
included:
1) Libel, slander or defamation;
2) Any infringement of copyright or of title or of slogan;
3) Piracy or unfair competition or idea
misappropriation under an implied contract;
4) Any invasion of right of privacy;
committed or alleged to have been committed in any
advertisement, publicity article, broadcast or telecast
and arising out of the Named Assured’s advertising
activities.
Joint App. at 135-36. The term “occurrence” was defined
as:
an accident, or a happening, or an event, or a
continuous or repeated exposure to conditions, which
unexpectedly and unintentionally results in a personal
injury, property damage or advertising liability during
the policy period. All such exposure to substantially
the same general conditions existing at or emanating
from one premises location shall be deemed one
occurrence.
Joint App. at 136.
In 1982, B&LE pleaded nolo contendere to an indictment
in the United States District Court for the District of
Columbia for a violation of the Sherman Antitrust Act, 15
U.S.C. § 1, for participating in a conspiracy in restraint of
trade. The district court convicted and sentenced B&LE and
on appeal the court of appeals affirmed. United States v.
Bessemer & Lake Erie R.R. Co., 717 F.2d 593 (D.C. Cir.
1983). The criminal case was followed by massive civil
litigation in which numerous entities involved in the lower
Lake Erie iron ore transportation market (including five
steel companies, three dock companies and three trucking
12
companies) filed ten separate civil suits in various United
States district courts against several railroads (including
B&LE) which operated docks to receive iron ore and from
which to transport the ore to inland steel mill locations. The
complaints alleged that the railroads had agreed to restrain
trade by denying or preventing the introduction of self-
unloading vessels and by preventing non-railroad-owned
docks and trucking firms from participating in the
transportation of iron ore from the upper Great Lakes and
Eastern Canada to discharge ports on the lower Great
Lakes and the Detroit River.
The ten civil cases were consolidated and transferred to
the United States District Court for the Eastern District of
Pennsylvania in April 1984 and became known as MDL
587, the In re Lower Lake Erie Iron Ore Antitrust Litigation.
The court tried MDL 587 in two phases, a liability phase
followed by a damage phase. The jury in the liability phase
rendered verdicts determining that B&LE had participated
with the other railroads in a conspiracy to restrain trade in
nine of the ten cases in violation of sections 1 and 2 of the
Sherman Act, 15 U.S.C. §§ 1-2, and Ohio law. In eight of
the cases, the jury awarded substantial damages for losses
the MDL plaintiffs suffered, and thereafter the court
entered final judgments reflecting trebled damages under
the federal antitrust laws and double damages under Ohio
law. According to USX, the district court entered final
judgments totaling $638.5 million against B&LE which
ultimately satisfied them by paying over $592 million. The
cases against the defendants other than B&LE were settled
or dismissed before or during the trial leaving it as the sole
defendant. B&LE appealed to this court but on May 27,
1993, we affirmed the district court’s judgment against it.
In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d
1146 (3d Cir. 1993). B&LE filed a petition for certiorari but
the Supreme Court denied it and thus the underlying
litigation is over.
In particular certain of the facts related to the conspiracy
are as follows. The railroads owned docks which used
“huletts” or heavy cranes to unload ore from standard
freighters (“bulkers”) to railroad cars to be transported to
inland steel mills. As technology advanced self-unloaders
13
were developed that eliminated the need for huletts and
made the railroads’ unloading equipment obsolete.
Furthermore, use of self-unloaders would have permitted
unloading of ore at private docks the railroads did not own
and would have made it possible for ore to be shipped
inland in trucks rather than on railroad cars.
In the appeal in the civil antitrust suit we explained that
the railroads accomplished the restraint of trade and
delayed the introduction of self-unloaders:
[b]y charging the same rate for unloading a self-
unloader as for unloading a bulker, by refusing to
approve commodity line haul rates from private docks
which would have handled self-unloaders, and by
concertedly refusing to make dock property available
for use by private docks . . . .
In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d at
1168. The railroads charged tariffs that assessed the same
dock handling service charges for self-unloading vessels as
for conventional vessels, even though they provided much
greater services for the conventional vessels. Moreover, the
railroads charged certain shippers and competitors
transportation rates from railroad-owned docks to steel
mills that were much lower than the transportation rates
available from private docks to the steel mills. Certain
railroads also refused to sell or lease property for use as
private iron ore docks.
The policies did not include the usual provisions
providing for the insurers to defend the insured for claims
within the policies, and in fact, the insurers did not defend
B&LE in the In re Lower Lake Erie Litigation. USX, however,
did seek indemnity from the insurers after the judgment
against B&LE was entered. The insurers refused this
demand and consequently on March 31, 1995, USX filed a
coverage action in the Court of Common Pleas of Allegheny
County, Pennsylvania, naming most of the insurers who
had participated in its catastrophic liability insurance
program from May 12, 1977, to April 1, 1983, as
defendants. ICAROM plc (“ICAROM”), one of the named
defendants and the successor to the Insurance Corporation
of Ireland (“ICI”), removed that action to the United States
14
District Court for the Western District of Pennsylvania on
the grounds that it was an “agency or instrumentality of a
foreign state” within the meaning of 28 U.S.C. § 1603(“section 1603”), a provision of the Foreign Sovereign
Immunities Act of 1976, 28 U.S.C. § 1602 et seq. (“FSIA”),
and thus could remove the action pursuant to 28 U.S.C.
§ 1441(d) (“section 1441(d)”) which provides that a foreign
state may remove a state court action to the district court.
Section 1441(d) compliments 28 U.S.C. § 1330(a) which
gives district courts jurisdiction over actions against foreign
states as defined in section 1603(a). An “agency or
instrumentality of a foreign state” is itself a foreign state
within sections 1441(d) and 1603.
On May 18, 1995, USX voluntarily dismissed its first
Common Pleas Court action without prejudice and initiated
the current action in the same court by filing a complaint
identical to its original complaint except that it excluded as
defendants any entity that was an “agency or
instrumentality of a foreign state” within the meaning of
section 1603 and did not include ICAROM. Br. of
Appellants at 6; Joint App. at 372. Three of the named
insurers then filed separate third-party complaints joining
ICAROM as a third-party defendant, asserting claims for
contribution against it.
ICAROM reacted by again filing a notice of removal
pursuant to section 1441(d), claiming that it was an agency
or instrumentality of a foreign state within the meaning of
section 1603. USX countered by filing a motion to remand
the action to the state court on the ground that ICAROM
was not an agency or instrumentality of a foreign state. By
an order dated July 18, 1995, the district court stayed all
proceedings, including discovery, pending disposition of the
jurisdictional issue that USX raised by its motion to
remand. The district court subsequently denied the motion
to remand as well as USX’s related motion to engage in
jurisdictional discovery by a comprehensive opinion and
order dated March 29, 1996, and entered April 1, 1996, as
it found that ICAROM was an agency or instrumentality of
a foreign state.
The court then lifted the stay and the parties engaged in
substantive discovery following which all parties filed
15
motions for summary judgment. On March 22, 2000, the
court issued a comprehensive opinion and order granting
the insurers’ motions for summary judgment and denying
USX’s motion for partial summary judgment. USX Corp. v.
Adriatic Ins. Co., 99 F. Supp. 2d 593 (W.D. Pa. 2000).
USX timely appealed from the orders of April 1, 1996,
and March 22, 2000, and, following briefing and oral
argument, we entered an order on May 1, 2001, without an
accompanying opinion, reversing the order of April 1, 1996,
but only to the extent that it denied USX’s motion for leave
to engage in discovery with respect to subject matter
jurisdiction. We did not, however, disturb the order for
summary judgment. In the same order we remanded the
case to the district court to allow discovery on the
jurisdictional issue and, even though we retained
jurisdiction, we authorized USX to move in the district
court at the completion of jurisdictional discovery for an
order vacating the final judgment in the case and
remanding the case to the state court. Our order further
provided for the parties to file supplemental briefs in this
court after completion of the remand proceedings.3 In fact,
the parties engaged in jurisdictional discovery on the
remand following which USX again moved to remand the
case to the state court. On September 11, 2002, the district
court issued another comprehensive opinion and order
denying the motion to remand.4 In that opinion the district
court deemed the notice of removal amended to correct any
asserted deficiency in it.
After the district court rendered its September 11, 2002
opinion and order but before the parties filed their
supplemental briefs and before we rescheduled oral
3. If the district court had vacated the final judgment and remanded the
case to the state court presumably the appeal would have become moot
and we would have dismissed it. We are not concerned here with
whether 28 U.S.C. § 1447(d) then would have precluded the insurers
from appealing.
4. The district court had issued yet another comprehensive opinion in
this case regarding a matter not in issue on this appeal on September
30, 1998. See USX Corp. v. Adriatic Ins. Co., 64 F. Supp. 2d 469 (W.D.
Pa. 1998).
16
argument, the parties filed a joint motion asking us to hold
the case in abeyance until the Supreme Court decided the
appeal in Dole Food Co. v. Patrickson, 123 S.Ct. 1655(2003), as they anticipated, correctly as it turned out, that
Dole would resolve an aspect of the jurisdictional question
we were to consider on the appeal. We granted that motion
and then, after the Court decided Dole, the parties filed
their supplemental briefs and we scheduled and
entertained oral argument and now decide the case in this
opinion. Even though USX did not file an amended notice
of appeal to encompass the September 11, 2002 order, in
view of the unusual circumstance that we remanded the
case to the district court but retained jurisdiction, we will
treat the appeal as including that order though it is not
specifically listed in the notice of appeal.
II. DISCUSSION
There are two overarching issues on this appeal. First,
USX contends that the district court did not have subject
matter jurisdiction because the only asserted basis for
exercise of such jurisdiction is that ICAROM, a third-party
defendant, is a foreign state within the meaning of the FSIA
as “an agency or instrumentality” of the Republic of Ireland
whereas it is no such thing. Thus, in USX’s view the district
court should have granted its motion to remand and never
have addressed this case on the merits. It further contends
that the insurers are barred by waiver for reasons that we
will explain below from raising an aspect of their argument
supporting the district court’s exercise of jurisdiction.
Second, USX contends that if the district court had
jurisdiction it erred in granting the insurers summary
judgment on the merits. We, of course, consider the
jurisdictional issue first.
A. THE JURISDICTIONAL QUESTION
The district court’s ruling that ICAROM is an agency or
instrumentality of a foreign state for purposes of subject-
matter jurisdiction under the FSIA presents a question of
law subject to plenary review, and we exercise plenary
review over the denial of the motion to remand. Werwinski
v. Ford Motor Co., 286 F.3d 661, 665 (3d Cir. 2002); Fed.
17
Ins. Co. v. Richard I. Rubin & Co., 12 F.3d 1270, 1282 (3d
Cir. 1993). While we would review the district court’s
factual findings for clear error if they were disputed, In re
Texas E. Transmission Corp. PCB Contamination Ins.
Coverage Litig., 15 F.3d 1230, 1238 n.8 (3d Cir. 1994),
there are no disputes of historical fact here, and thus we
reject the insurers’ contention that we should review the
district court’s finding that ICAROM was an agency or
instrumentality of a foreign state deferentially for clear
error. Indeed, USX indicates that it “does not dispute the
District Court’s factual findings relating to ICI/ICAROM’s
alleged organ status.” Reply Br. at 9. We review the district
court’s decision to deem the notice of removal amended to
correct any asserted deficiency in it on an abuse of
discretion basis. See Scattergood v. Perelman, 945 F.2d
618, 627 (3d Cir. 1991). The district court exercised
jurisdiction pursuant to section 1441(d) which permits
foreign states as defined in the FSIA to remove actions
brought against them to the district court and we have
jurisdiction under 28 U.S.C. § 1291.
Section 1603, which is as we have indicated a provision
of the FSIA, provides:
For purposes of this chapter —
(a) A ‘foreign state’, except as used in section 1608 of
this title, includes a political subdivision of a foreign
state or an agency or instrumentality of a foreign state
as defined in subsection (b).
(b) An ‘agency or instrumentality of a foreign state’
means any entity—
(1) which is a separate legal person, corporate or
otherwise, and
(2) which is an organ of a foreign state or political
subdivision thereof, or a majority of whose shares
or other ownership interest is owned by a foreign
state or political subdivision thereof, and
(3) which is neither a citizen of a State of the
United States as defined in section 1332(c) and (d)
of this title, nor created under the laws of any third
country.
18
(c) The ‘United States’ includes all territory and
waters, continental or insular, subject to the
jurisdiction of the United States.
Significantly section 1603(b)(2) is two-pronged as it
specifies that an entity may be an “agency or
instrumentality” by reason of being owned by a foreign
state or being its organ.
Originally the district court denied the motion to remand
on the basis of its finding that the Republic of Ireland
owned “a majority” of ICAROM’s shares, a conclusion it
reached because the court determined that the “tiered”
ownership through which Ireland owned ICAROM, i.e., the
ownership of an entity that in turn owned ICAROM, was
sufficient to establish Ireland’s ownership of ICAROM itself
for purposes of the FSIA. Following the remand the district
court adhered to that conclusion and, in addition, held that
ICAROM was an agency or instrumentality of Ireland as its
“organ,” a finding that it had not made in its April 1, 1996
opinion. Thus, as it originally had done, it determined that
it had jurisdiction and denied the motion to remand.
In Dole, however, after the district court denied USX’s
renewed motion to remand, the Supreme Court rejected the
“tiered” ownership theory under the FSIA as it held that a
subsidiary of an instrumentality is not itself an
instrumentality. The parties agree that Dole is controlling
here to the extent that the district court upheld its exercise
of jurisdiction predicated on the majority ownership prong
of section 1603(b)(2), and thus we cannot affirm its order
denying remand on the basis of that conclusion. The
insurers contend, however, that the district court did have
jurisdiction inasmuch as ICAROM is, as the district court
held, an organ of the Irish government and by reason
thereof is its agency or instrumentality. USX answers that
the insurers cannot rely on the organ prong of section
1603(b)(2) for determining if ICAROM is an agency or
instrumentality of Ireland as they have waived their right to
do so, and, in any event, ICAROM is not an organ of the
Irish government.
In view of the jurisdictional discovery and the
submissions of the parties we know a great deal about
19
ICAROM which, as we have indicated, formerly was known
as the Insurance Corporation of Ireland.5 ICI was
incorporated as a limited liability company in Dublin in
1935 and rapidly grew to become the largest liability and
marine insurer in Ireland. In the 1970s it expanded its
operations into foreign markets, including the London
Insurance Market. In 1981, Allied Irish Banks (“AIB”)
acquired 25% of ICI, and in 1983 purchased the remainder
of ICI and assumed its full control. By 1984, however, AIB
determined that ICI’s continued viability was in question,
due in part to losses associated with its London business.
In early 1985, AIB informed the Irish government of ICI’s
precarious position. At the time, AIB was one of the largest
banks in Ireland, and ICI was a leading insurer to corporate
Ireland. On March 15, 1985, the Irish government, hoping
to avoid ICI’s collapse and to minimize the general
economic repercussions that such a collapse could trigger,
took emergency action. AIB transferred all shares of ICI for
the nominal sum of IR 5 to Gebhard Limited (“Gebhard”), a
shelf company that an Irish law firm assisting the Irish
government had formed to acquire the ICI shares. Gebhard
then assumed a guarantee AIB previously had given to the
Institute of London Underwriters on behalf of ICI. The
agreement to assume the guarantee was subject to approval
by the Irish Minister for Industry, Trade, Commerce, and
Tourism (“the Minister”). Two high-ranking civil servants
held Gebhard’s only two shares6 in trust for the Minister.
That same day, ICI was placed into administration
pursuant to the Insurance Act of 1983 (“the 1983 Act”)
authorizing appointment of an administrator to take over
the management of insolvent insurers for the purpose of
placing them on sound commercial and financial footing, a
process similar to comparable American proceedings. The
statute authorizes the administrator to access the
Insurance Compensation Fund (“ICF ”), a mechanism used
to channel funds to finance insurers’ operations. The
Minister nominated William McCann, a partner in the
5. The district court in its comprehensive opinion of September 11, 2002,
set forth the facts related to ICAROM in great detail.
6. Under Irish law, a company such as Gebhard that is not a public
limited company (“plc”) must have at least two shareholders.
20
accounting firm of Gregg, Gardner & Company, as ICI’s
provisional administrator, and Ireland’s High Court made
his appointment permanent on March 25, 1985.
On March 20, 1985, Gebhard changed its name to
Sealuchais Arachais Teoranta (“SAT”). SAT had no
employees and was simply a holding company, which, as
the Minister described in an address to Parliament, had no
“influence over the management of the company in
administration . . . because the company in administration
is managed by the administrator who has set aside the
board of the company in administration and is acting in
accordance with the law and the directions of the court.”
Juris. J.A. at 297.
On April 8, 1985, the Irish Parliament passed the
Insurance (Miscellaneous Provisions) Act of 1985 (“the 1985
Act”), retroactively authorizing the acquisition of SAT
(formerly Gebhard) effective as of March 15, 1985. The
1985 Act further provides that the Minister may hold the
shares of SAT as he or she sees fit and that SAT’s
shareholders must hold the shares in trust for the Minister
and pay all dividends or other monies received to the
Minister for the benefit of the Exchequer. Moreover, the
1985 Act provides that the Minister may require the
shareholders to transfer their shares back to the Minister
or his designee and that upon the death of a shareholder,
the shares automatically vest in the Minister without the
need for any transfer of shares. The 1985 Act authorizes
the Minister to appoint the directors of SAT after
consultation with the Minister of Finance and provides that
the directors hold office on terms and conditions the
Minister determines subject to being removed by him or her
at any time. Finally, the 1985 Act authorizes the Minister
to guarantee payment by ICI under certain insurance
policies issued by the Institute of London Underwriters and
requires the Minister to report to Parliament concerning
payments made under such guarantee.
Because Irish law requires a public limited company
(“plc”) to have at least seven shareholders, the government
arranged for legal title to six of ICI’s 120 million commons
shares to be vested in civil servants who hold the shares in
trust for the Minister. SAT retained the remaining
21
119,999,994 shares. Notwithstanding the 1985 Act’s
provisions allowing the Minister to acquire and hold its
shares as the Minister sees fit, the Minister never has
acquired direct legal title to the shares of SAT.
In 1990, the administrator negotiated the sale of ICI’s
ongoing insurance operations in Ireland (“the Irish
Business”), as well as ICI’s trade name and goodwill. The
administrator sought and obtained permission from the
government to test the market for such a sale and
subsequently initiated a competitive process to generate
tender offers from outside companies. When the field was
reduced to two competitors, the administrator made a
formal recommendation to the government which the
cabinet approved. ICI thereafter sold its trade name and the
Irish Business to Orkandale Holdings, Ltd. (“Orkandale”), a
subsidiary of Assurances Generales de France (“AGF ”). All
of ICI’s shares were transferred to Orkandale for a short
time during which Orkandale exercised a put option that
caused all of the assets, other than the Irish Business and
ICI’s trade name, as well as the ICI shares to revert to SAT.
These procedures allowed AGF to take advantage of ICI’s
tax losses in the range of 150 million. After it shed the Irish
Business and the ICI trade name, ICI was renamed
ICAROM. ICAROM has not underwritten new business but
rather has operated as a “runoff company,” the entire
purpose of which is to wind up its remaining liabilities, the
complete discharge of which is not expected to be
accomplished until 2040 or 2050.
According to USX, ICAROM is nothing more than a
private company in administration under the 1983 Act
authorizing such action for insolvent insurers. It points out
that the administrator, not the government, manages and
controls ICAROM’s day-to-day operations, ICAROM does
not have board or shareholder meetings, and no actions,
appointments, or other corporate business can be
conducted by shareholder vote. The administrator’s
management of ICAROM is subject only to approval by the
High Court. As USX emphasizes, the only other insurer to
have operated under administration pursuant to the 1983
Act is an Irish insurance company known as PMPA/Primor
(“PMPA”), in which the government never has claimed any
22
ownership interest. The ICF has provided the outside
funding of ICAROM and the government has not funded
ICAROM directly. The government has not incurred costs as
a result of the operation and administration of ICAROM
other than having foregone interest on a 32 million loan
that the Irish Exchequer agreed to provide interest-free as
part of a 1992 Financing Agreement for ICAROM’s benefit.7
Notwithstanding the circumstances to which USX
alludes, the record demonstrates that the government has
played a role in financing ICAROM and in overseeing the
administrator’s management of the company. The
administrator regularly consults with the Department of
Enterprise, Trade, and Employment on all significant
matters and all major decisions are made with the
department’s approval. The administrator delivers a formal
presentation annually to the Departments of Enterprise,
Trade, and Employment and Finance regarding the status
of ICAROM’s operations and prepares quarterly reports that
are forwarded to the same departments. The departments
supported the nomination of the current administrator
before the High Court and approved the current general
manager prior to his appointment by the administrator.
Although the government has not provided funding
directly to ICAROM, it has channeled funds into the ICF so
that they can be disbursed to ICAROM. Under a 1985
Financing Agreement, 100 million was advanced to the ICF
for the benefit of ICAROM. AIB provided 70 million, while
the government, through the Irish Central Bank, provided
a 30 million loan.8 Under the 1985 Agreement, interest on
the 30 million loan in the amount of 3.5 million per annum
was to be paid by AIB and other private banks. In fact,
interest rates fell and the interest due was less than the 3.5
million per annum set by the agreement. Although the
government was entitled to retain the extra funds
(approximately 2.1 million), it disbursed the excess interest
payments to ICAROM. In 1992, there was another
7. We believe that the government also has had costs in terms of the use
of time of its officials on ICAROM matters though our result does not
depend on these costs having been incurred.
8. ICAROM repaid in full the 100 million in September of 2000.
23
Financing Agreement executed whereby AIB made an
aggregate payment of 176 million, at a rate of 8.8 million
per year for 20 years, to the ICF, while the government,
through the Exchequer, contributed the one-time interest-
free loan of 32 million discussed above. The foregone
interest amounted to approximately 2.1 million per year.
ICAROM is expected to repay these advances in 2012.
Finally, ICAROM received, through the ICF, the proceeds
of four commercial loans from three separate financial
institutions in the amount of 65 million. The Irish
Department of Finance guaranteed that the ICF would have
sufficient funds to satisfy the obligations on these four
loans, as authorized by Irish statute, although it did not
directly guarantee them. Those loans have been fully
repaid, and the government has not been obligated to make
good on its guarantees.
1. Waiver
The first aspect of the jurisdictional dispute that we
address is whether the insurers waived the right to rely on
the “organ” basis of jurisdiction.9
ICAROM’s notice of removal states:
Removal of this action is expressly authorized by 28
U.S.C. § 1441(d), which provides, in pertinent part:
‘Any civil action brought in a State against a foreign
state as defined in section 1603(a) of this title may be
removed by the foreign state to the district court of the
United States for the district and division embracing
the place where such action is pending.’
ICAROM is a ‘foreign state’ within the meaning of 28
U.S.C. § 1603(a). That section defines a ‘foreign state’
as, inter alia, ‘an agency or instrumentality of a foreign
state as defined in subsection (b).’ Subsection (b) of
§ 1603, in turn defines ‘an agency or instrumentality of
9. We recognize that it could be argued that the insurers other than
ICAROM do not have standing to advance the jurisdictional argument
inasmuch as only ICAROM could have removed the case. We will not
linger on this point, however, inasmuch as ICAROM itself is defending
the district court’s denial of the motions to remand.
24
a foreign state’ as ‘any entity’ that (1) ‘is a separate
legal person, corporate or otherwise,’ (2) ‘is an organ of
a foreign state or political subdivision thereof, or a
majority of whose shares or other ownership interest is
owned by a foreign state or political subdivision
thereof,’ and (3) ‘is neither a citizen of a State of the
United States . . . nor created under the laws of any
third country.’ Id. § 1603(b).
ICAROM meets all of these criteria. It is a corporation
organized pursuant to the laws of the Republic of
Ireland. A majority of ICAROM’s shares or other
ownership interest is owned by the government of the
Republic of Ireland. ICAROM is neither a citizen of the
United States nor created under the laws of any third
country. ICAROM is therefore a ‘foreign state’ within
the meaning of 28 U.S.C. § 1603(a).
Joint App. at 492 (alteration in original). USX does not
contend that ICAROM does not satisfy the first and third
requirements of section 1603(b) for an entity to be an
“agency or instrumentality of a foreign state.”
Prior to our remand of the case ICAROM argued that it
satisfied the second element of section 1603(b) because
Ireland owned a majority of its shares and the district court
agreed with that contention. On the remand, as we have
indicated, the district court adhered to its earlier
conclusion that Ireland owned ICAROM through a “tiered”
arrangement within the FSIA’s definition of majority
ownership by a foreign state. Juris. J.A. at 37. Since that
time, however, as we also have indicated, the Supreme
Court has held that a subsidiary of an instrumentality is
not itself entitled to instrumentality status, so that “tiering”
arrangements cannot provide the basis for finding foreign
state status under the majority ownership prong of section
1603(b)(2). Rather, that prong applies “only if the foreign
state itself owns a majority of the corporation’s shares.”
Dole, 123 S.Ct. at 1662.
The district court, however, also considered ICAROM’s
alternative argument on the remand under the “organ”
prong of section 1603(b)(2), which ICAROM explicitly first
advanced at that time, and held that ICAROM qualified as
25
an organ of Ireland and thus was its agency or
instrumentality. In answer to USX’s argument that ICAROM
waived the right to invoke the “organ” prong by referencing
only the majority ownership prong in the notice of removal,
the district court deemed the notice amended under 28
U.S.C. § 1653, which provides that “[d]efective allegations of
jurisdiction may be amended, upon terms, in the trial or
appellate courts,” noting that the notice of removal “invoked
§ 1603 in its entirety” and that ICAROM’s “organ” argument
“is premised on the same facts that support its invocation
of the instrumentality prong.” Juris. J.A. at 37-40. ICAROM
does not dispute that it initially relied on the majority
ownership prong of section 1603(b)(2), but it argues that its
notice of appeal nevertheless referenced section 1603 as a
whole. It further contends that, in any event, even if it
belatedly advanced the organ prong argument it caused
USX no prejudice by doing so and its procedure was
reasonable inasmuch as before Dole it appeared that a
tiering arrangement would satisfy the majority ownership
prong of section 1603(b)(2) and, indeed, we so had held
with respect to ICAROM itself in In re Texas E.
Transmission Corp., 15 F.3d at 1238 n.8. It also contends
that the same set of facts underlie an analysis under both
the ownership and organ prongs of section 1603(b)(2).
Section 1653 gives both district and appellate courts the
power to remedy inadequate jurisdictional allegations, but
not defective jurisdictional facts. Newman-Green, Inc. v.
Alfonzo Larrain, 490 U.S. 826, 831-32, 109 S.Ct. 2218,
2222 (1989).10 Moreover, we have held that a district court
abused its discretion by not allowing plaintiffs to amend
their complaint to allege jurisdiction on diversity grounds
where diversity existed but had not been a necessary basis
for jurisdiction before the federal claims in the case were
dismissed. Scattergood, 945 F.2d at 627.
In this case, ICAROM stated all three elements of the
“agency or instrumentality” definition in its notice of
10. It is clear that USX, initially not contesting ICAROM’s foreign state
status under section 1603(b), tried to avoid creating a basis for federal
jurisdiction by dismissing its initial state court action and then bringing
a second state court action omitting ICAROM.
26
removal, including as part of the second element as defined
in section 1603(b)(2) both the majority ownership prong
and the organ prong. It then alleged that “ICAROM meets
all of these criteria.” Joint App. at 492. To be sure, in its
brief recitation of the facts supporting that allegation,
ICAROM noted that Ireland owned a majority of its shares,
thus directly referencing only the majority ownership prong
of section 1603(b)(2). Although jurisdiction under that
prong cannot be sustained after Dole, any possible defect in
the notice of removal is of the sort that we ordered the
district court to cure with respect to a complaint pursuant
to section 1653 in Scattergood which seems to us to be
persuasive authority in this parallel situation. Here,
reliance on the organ prong as a basis for jurisdiction was
not clearly required until the Supreme Court clarified that
tiering arrangements would not satisfy the majority
ownership prong of section 1603(b)(2). Moreover, although,
under Dole, Ireland does not own ICAROM for purposes of
the FSIA, its mistaken allegation to that effect bears on a
point central to the organ inquiry, namely, Ireland’s control
over ICAROM.
Thus, the same allegations contained in the notice of
removal, amended only to clarify that Ireland controls,
rather than owns, ICAROM through SAT, support the
crucial allegation of the notice, namely, that ICAROM
satisfies all the requirements to be an agency or
instrumentality of Ireland as set forth in section 1603(b). In
other words, although the allegation of ownership most
clearly relates to the majority ownership prong of section
1603(b)(2), it is also highly relevant to ICAROM’s organ
status. The district court’s amendment of the notice
pursuant to section 1653 therefore did not add new
jurisdictional facts and did not rely on a basis of
jurisdiction different from that originally alleged,11 namely
11. USX cites a number of cases disallowing amendments creating an
entirely new basis for jurisdiction. See, e.g., Blakeley v. United Cable
Sys., 105 F. Supp. 2d 574, 579-80 (S.D. Miss. 2000); Iwag v. Geisel
Compania Maritima, S.A., 882 F. Supp. 597, 601 (S.D. Tex. 1995); see
also 14C Charles Alan Wright et al., Federal Practice and Procedure
§ 3733, at 358-61 (3d ed. 1998) (“[A]mendment of the removal notice . . .
may correct an imperfect statement of citizenship, or state the previously
27
that ICAROM is an agency or instrumentality of Ireland
under section 1603. All it did was amend the ownership
allegation in light of an intervening clarification in the law.12
articulated grounds more fully, or correct the jurisdictional amount.
Completely new grounds for removal jurisdiction may not be added and
missing allegations may not be furnished, however.”) (footnote omitted).
These cases are inapposite, however, as new grounds for removal have
not been added and new factual allegations have not been made.
12. ICAROM submitted the affidavit of Brendan Murphy, its former
general manager, in opposition to USX’s original motion to remand
setting forth the history and purpose of the government’s involvement
with ICAROM and other facts that pertain not only to the majority
ownership analysis but to the organ analysis. The Supreme Court has
upheld removal where jurisdictional facts required to support the
removal were found in later-filed affidavits rather than in the notice of
removal. Willingham v. Morgan, 395 U.S. 402, 407 n.3, 89 S.Ct. 1813,
1816 n.3 (1969) (“This material should have appeared in the petition for
removal. However, for purposes of this review it is proper to treat the
removal petition as if it had been amended to include the relevant
information contained in the later-filed affidavits. See 28 U.S.C.
§ 1653.”). Other courts more recently have allowed consideration of facts
contained in later-filed affidavits, treating those facts as an amendment
of the notice of removal under section 1653. See, e.g., Cohn v. Petsmart,
Inc., 281 F.3d 837, 840 n.1 (9th Cir. 2002) (holding that the district
court did not err in construing an affidavit setting forth the facts
supporting the amount in controversy in a diversity case as an
amendment under section 1653 to the notice of removal which stated
summarily, without alleging any underlying facts, that the amount in
controversy exceeded $75,000); cf. Miller v. Principal Life Ins. Co., 189 F.
Supp. 2d 254, 257-58 (E.D. Pa. 2002) (holding that, even assuming that
the defendant’s initial removal petition was defective in that it did not
state that a codefendant was only a nominal defendant, Willingham
permitted treatment of an amended notice of removal filed more than 30
days after the filing of the original removal notice and after service of a
motion to remand as an amendment of the original notice under section
1653). Furthermore, this approach is consistent with 28 U.S.C.
§ 1446(a), which, borrowing language from the liberal pleading standard
of Fed. R. Civ. P. 8(a), was amended in 1988 to require only a “short and
plain statement of the grounds for removal.” See Charles Alan Wright et
al., 14C Federal Practice and Procedure § 3733, at 351-56 (3d ed. 1998)
(describing the amendment of section 1446(a) and stating: “[T]he better
rule is that detailed grounds for removal need not be set forth in the
notice. Rather, it should be sufficient if the court is provided the facts
28
ICAROM alleges now, as it did originally, that jurisdiction
exists under section 1441(d) because it is an agency or
instrumentality of the Republic of Ireland under section
1603.13 Thus, the district court’s determination to allow the
from which removal jurisdiction can be determined. Thus, the same
liberal rules employed in testing the sufficiency of a pleading should
apply to appraising the sufficiency of a defendant’s notice of removal.”
(footnotes omitted)). Accordingly, although we are mindful that courts
construe removal statutes strictly with all doubts resolved in favor of
remand, see Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir.
1990), we are satisfied that sections 1446(a) and 1653, together with the
Supreme Court’s opinion in Willingham, permit a court to consider
jurisdictional facts contained in later-filed affidavits as amendments to
the removal petition where, as here, those facts merely clarify (or correct
technical deficiencies in) the allegations already contained in the original
notice. To the extent, if any, that cases like Fuller v. Exxon Corp., 131 F.
Supp. 2d 1323, 1327 (S.D. Ala. 2001), take a more restrictive view of
section 1653, we decline to adopt their reasoning.
13. We also point out that section 1653 need be invoked to permit an
amendment only after the expiration of the 30-day period within which
an action may be removed under 28 U.S.C. § 1446(b), during which time
a removal notice may be amended freely. See Shaw v. Dow Brands, Inc.,
994 F.2d 364, 368 (7th Cir. 1993). Under 28 U.S.C. § 1441(d), however,
“[w]here removal is based upon this subsection [governing removal by a
foreign state], the time limitations of section 1446(b) of this chapter may
be enlarged at any time for cause shown.” Because the 30-day time limit
on free amendments of the petition is derived from section 1446(b),
section 1441(d) would appear to allow a foreign state to amend its
removal petition freely during the 30-day time period and for cause at
any other time. Furthermore, it appears that an amendment for cause
under section 1441(d) likely could be on broader grounds than might be
permissible under 28 U.S.C. § 1653 although we do not rely on that
possibility here. See footnote 11 supra. We are satisfied that USX
suffered no prejudice as a result of the district court’s consideration of
the organ prong because ICAROM raised this argument shortly after
remand from this court so that USX had ample time to respond to it,
and because in part the same facts are relevant under either the
ownership or organ prong of section 1603(b)(2) although they could not
satisfy the ownership prong here. In this regard we observe that when we
asked at oral argument what prejudice that USX suffered by reason of
ICAROM’s possibly late identification of the organ prong of section 1603
as a basis for foreign state status and thus for district court jurisdiction,
USX’s attorney was not able to make a specific indication of what it
might be. Certainly USX had ample time to develop the facts with respect
to ICAROM’s organ status.
29
amendment amplifying the notice of removal clearly was
within its sound discretion.14
2. Analysis Under the Organ Prong
The FSIA does not define the term “organ” as used in
section 1603(b)(2) and we have not had occasion to
consider the meaning or application of that term under the
statute. Other courts have developed a flexible approach to
determine whether an entity qualifies as an organ of a
foreign state under the FSIA and thus is its agency or
instrumentality. The Court of Appeals for the Ninth Circuit
asks whether the entity “ ‘engages in a public activity on
behalf of the foreign government.’ ” EOTT Energy Operating
Ltd. P’Ship v. Winterthur Swiss Ins. Co., 257 F.3d 992, 997
(9th Cir. 2001) (quoting Patrickson v. Dole Food Co., 251
F.3d 795, 807 (9th Cir. 2001), aff ’d in part, dismissed in
part, 123 S.Ct. 1655 (2003)). In doing so, that court
considers factors including “ ‘the circumstances
surrounding the entity’s creation, the purpose of its
activities, its independence from the government, the level
of government financial support, its employment policies,
and its obligations and privileges under state law.’ ” Id.(quoting Patrickson, 251 F.3d at 807). The court also has
stated that “[t]he Act’s legislative history suggests that
Congress intended the terms ‘organ’ and ‘agency or
instrumentality’ to be read broadly.” Gates v. Victor Fine
Foods, 54 F.3d 1457, 1460 (9th Cir. 1995). The Court of
Appeals for the Fifth Circuit looks to similar factors: “ ‘(1)
whether the foreign state created the entity for a national
purpose; (2) whether the foreign state actively supervises
the entity; (3) whether the foreign state requires the hiring
of public employees and pays their salaries; (4) whether the
entity holds exclusive rights to some right in the [foreign]
country; and (5) how the entity is treated under foreign
state law.’ ” Kelly v. Syria Shell Petroleum Dev. B.V., 213
14. Certain insurers contend that USX has waived the waiver issue by
not discussing the fact that the district court deemed the notice
amended under section 1653 and not arguing that it abused its
discretion in doing so. Supp. Br. at 30 & n.8. Inasmuch as USX’s brief
does discuss section 1653, albeit briefly, USX Br. at 29, it did not waive
this issue.
30
F.3d 841, 846-47 (5th Cir. 2000) (quoting Supra Med. Corp.
v. McGonigle, 955 F. Supp. 374, 379 (E.D. Pa. 1997)). That
court, however, does not apply those factors mechanically
and does not require that all five support a determination
that an entity is an organ. Id. These two courts of appeals
appear to be the only ones to have considered directly the
factors leading to a conclusion that an entity is an organ of
a foreign state.
A primary purpose of the FSIA is to make it difficult for
private litigants to bring foreign governments into court,
thereby avoiding affronting them. Patrickson, 251 F.3d at
806 (citing First Nat’l City Bank v. Banco Nacional de Cuba,
406 U.S. 759, 762, 92 S.Ct. 1808, 1810-11 (1972)). In
passing the FSIA, Congress adopted the so-called restrictive
theory of sovereign immunity, whereby a foreign state
(including its agencies and instrumentalities) is immune
from suit for its public or sovereign activities, but not for its
commercial or private activities. H.R. Rep. No. 94-1487, at
7 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6605. Even
when a case involves a foreign state’s private activities,
however, the FSIA provides the state with particularized
procedural treatment in some circumstances, for example,
regarding venue, 28 U.S.C. § 1391(f), rule of decision, id.§ 1606, and execution, id. § 1610. Furthermore, as is
evident from this case, a foreign state defendant, when
named as a third-party defendant may remove the entire
case to a district court, even where it is merely one among
almost 50 otherwise non-foreign state defendants. The
court then must try the case without a jury. 28 U.S.C.
§ 1441(d).
The FSIA therefore provides for suit in federal court in a
potentially broad array of cases, with significant procedural
consequences, some of which a plaintiff likely will not
welcome. With respect to the jurisdictional provisions of the
FSIA, the legislative history states: “Such broad jurisdiction
in the Federal courts should be conducive to uniformity in
decision, which is desirable since a disparate treatment of
cases involving foreign governments may have adverse
foreign relations consequences.” H.R. Rep. No. 94-1487, at
13, 1976 U.S.C.C.A.N. at 6611. Thus, in considering the
scope of the FSIA the point has not been lost on us that the
31
presence of a foreign state third-party defendant has
resulted in the disposition in a district court of a case even
though it had been brought in a state court and
overwhelmingly involves domestic parties and state law
issues and, in the absence of the foreign state party, would
have remained in the state court.15
In deciding whether to adopt the Court of Appeals for the
Ninth Circuit’s standard for determining whether an entity
constitutes an organ of a foreign state, we therefore should
be mindful of the congressional goals of promoting
uniformity of decision and avoiding impairing foreign
relations because the consequences of the presence of
FSIA-predicated jurisdiction are so significant. Surely, a
bright-line rule of the sort the Supreme Court adopted with
respect to the majority ownership in Dole provides for the
greatest uniformity of decision. Nevertheless inasmuch as
the statute and legislative history are silent as to a
definition of the term “organ,” and that term inherently is
vague and does not have a well-established common law
meaning, Congress’s inclusion of the term within the
definition of “agency or instrumentality” of a foreign state
suggests the need for a more flexible approach under the
organ prong of section 1603(b)(2) than the Court adopted in
Dole with respect to the ownership prong of that section.
A flexible approach is particularly appropriate after Dole,
inasmuch as courts likely now will be asked to evaluate the
possible organ status of a wide variety of entities controlled
by foreign states through tiering arrangements and because
of the widely differing forms of ownership or control foreign
states may exert over entities. See Joseph W. Hardy, Jr.,
Note, Wipe Away the Tiers: Determining Agency or
Instrumentality Status Under the Foreign Sovereign
Immunities Act, 31 Ga. L. Rev. 1121, 1161, 1164-66, 1172-
73 (1997). Nonetheless, we must be vigilant to protect the
goal of uniformity and therefore in determining whether an
entity is an organ should consider factors similar, if not
identical, to those considered by the Courts of Appeals of
the Ninth and Fifth Circuits.
15. Of course, the same thing can happen when there is diversity of
citizenship even though, as here, the plaintiff initiated the action in a
state court.
32
We agree with the Court of Appeals for the Ninth Circuit
that for an entity to be an organ of a foreign state it must
engage in a public activity on behalf of the foreign
government. Requiring less would open the door to
situations in which a party only tangentially related to a
foreign state could claim foreign state status and avail itself
(and, incidentally, any other defendants in the case) of the
FSIA’s procedural provisions which, as we have indicated,
plaintiffs are not likely to welcome. This result would be
unfair to plaintiffs, who in some such cases might not have
reason to know of the slight relationship of their dealings
with the foreign states, and who, therefore, likely would not
have had the opportunity to consider this important fact
when negotiating contracts by, for example, negotiating for
waiver clauses, or when initiating suit by following the
special procedures required by the FSIA.16 Joseph W.
Dellapenna, Refining the Foreign Sovereign Immunities Act,
9 Willamette J. Int’l L. & Disp. Resol. 57, 93 (2001).
Requiring less would not further the goal of avoiding
adverse foreign relations. On the other hand, requiring
more would pose potential foreign relations problems.
One district court, taking a narrow view of the term
“organ,” cited a Supreme Court case interpreting the term
“agency or instrumentality” of the Federal government for
purposes of the Federal Tort Claims Act to support its
conclusion that organ status under the FSIA turns not on
“the degree to which an entity is subject to government
regulation aimed at assuring compliance with government
goals,” but on “the ‘power of the Federal Government to
control the detailed physical performance of the
contractor.’ ” See Edlow Int’l Co. v. Nuklearna Elektrarna
Krsko, 441 F. Supp. 827, 832 (D.D.C. 1977) (quoting United
States v. Orleans, 425 U.S. 807, 814, 96 S.Ct. 1971, 1976
(1976)). The court therefore concluded that the entity
16. Indeed, as this case demonstrates, a party might be dealing with an
entity that was not an organ of a foreign state at the time of its dealings.
Here USX obtained its insurance coverage for periods before Ireland
became involved in ICI and thus it was not dealing with an organ of
Ireland at that time. But we are holding that ICAROM was an organ
when USX sued it and it removed the case and its status at that time is
what matters. See Dole, 123 S.Ct. at 1662.
33
involved in that case, a “worker’s organization” founded
under the constitution and laws of the Socialist Federal
Republic of Yugoslavia (“SFRY”), was not an organ of the
SFRY despite the extent to which the state exercised
ultimate control over its policies and operations because its
“daily operations [were] virtually free of direct government
control.” Id. This narrow a construction of the term “organ”
could have potentially adverse effects on foreign relations
insofar as foreign states may place significant national
value in an entity yet not directly control its daily
operations. The Court of Appeals for the Ninth Circuit’s
definition finds a happy medium whereby an entity that
engages in activity serving a national interest and does so
on behalf of its national government qualifies for the
protections of the FSIA, including a federal forum.
In making this assessment, factors employed by both the
Courts of Appeals for the Ninth and Fifth Circuits are
relevant, although no one is determinative: (1) the
circumstances surrounding the entity’s creation; (2) the
purpose of its activities; (3) the degree of supervision by the
government; (4) the level of government financial support;
(5) the entity’s employment policies, particularly regarding
whether the foreign state requires the hiring of public
employees and pays their salaries; and (6) the entity’s
obligations and privileges under the foreign state’s laws.17
To this list, we should add an additional factor: (7) the
ownership structure of the entity. Under the organ prong,
as opposed to the majority ownership prong of section
1603(b)(2), a foreign state might own only 10% of an entity;
it might own directly 50% of the entity; or it might own
17. It is important to note with respect to the sixth factor that
characteristics such as the entity’s ability to sue and be sued in its own
name, to contract in its own name, and to own property in its own name
are not particularly significant with respect to a finding of organ status,
given that all entities claiming agency or instrumentality status must,
under 28 U.S.C. § 1603(b)(1), be a “separate legal person.” Congress
intended this term to encompass “a corporation, association, foundation,
or any other entity which, under the law of the foreign state where it was
created, can sue or be sued in its own name, contract in its own name
or hold property in its own name.” H.R. Rep. 94-1487, at 15, 1976
U.S.C.C.A.N. at 6614.
34
even 100% of a holding company that owns 100% of the
entity. On the other hand it is possible that a foreign state
might not own any portion of any entity that nevertheless
is its organ as section 1603(b)(2) does not require a foreign
state to have any ownership interest in an entity for it to be
its organ. Courts should consider how these different
ownership structures might influence the degree to which
an entity is performing a function “on behalf of the foreign
government.”18
Before applying these factors to this case, we reiterate
that USX “does not dispute the District Court’s factual
findings relating to ICI/Icarom’s alleged organ status.” USX
Supp. Reply Br. at 9. USX contends only that the district
court misapplied the relevant legal factors in considering
those facts.
a. The Circumstances Surrounding ICAROM’s Creation
It is undisputed that ICI was created as a purely
commercial, private company in 1935 for the for-profit
business purpose of selling insurance policies. USX relies
heavily on this fact, and on the fact that since being placed
in administration ICAROM has continued as a commercial
venture by selling off the Irish Business and by running off
liabilities. We believe, however, that USX misunderstands
the nature of this factor. First, while this factor certainly
would weigh more heavily in favor of organ status where
the entity originally was created for a government purpose,
see, e.g., Kelly, 213 F.3d at 848 (noting that the entity in
question was created by government decree to develop and
explore the government’s mineral resources); Corporacion
Mexicana de Servicios Maritimos, S.A. de C.V. v. M/T
Respect, 89 F.3d 650, 654-55 (9th Cir. 1996) (noting that
the entity in question was created by Mexican law to refine
18. Given this analysis, it is clear that the factual allegations of
ICAROM’s notice of removal, which include the assertion that Ireland
owns a majority of ICAROM’s shares, are relevant to the organ analysis
as well as to the majority ownership analysis on which ICAROM
originally focused. Even if we did not add “ownership structure” as a
seventh factor to consider in the organ analysis the allegation likely
would be relevant to the third factor, namely, the degree of supervision
by the government.
35
and distribute property of the Mexican government), it
should not be applied so mechanically as to ignore the
possibility that a foreign state later may acquire an initially
private company and use it for government purposes.
Furthermore, that ICAROM’s activities may have been
predominantly (or entirely) commercial has little bearing on
this factor (although it is relevant to the second factor). In
any event, a foreign state receives the benefit of the FSIA’s
procedural provisions in actions arising out of its
commercial activities, so that too heavy a focus on the
commercial nature of an entity’s activities would tend to
confuse the question of the level of protection provided by
the FSIA (full immunity or not) with the antecedent
question we face here, namely, whether the entity comes
within the purview of the FSIA at all.
As the district court found, the Irish government
indirectly acquired ICI to serve the important national
interest of protecting the Irish insurance and banking
industries from financial disaster, which in turn helped to
maintain stability in the Irish economy. Juris. J.A. at 41-
42. The government did not seek any profit-making
opportunity, but rather acquired ICI to further this
important governmental interest. To advance this purpose,
the Minister acted in accordance with special legislation
adopted by the Irish Parliament. That legislation further
provided that the Minister may hold the shares of SAT as
he or she sees fit; SAT’s shareholders must hold the shares
in trust for the Minister and are bound to pay all dividends
or other monies received to the Minister for the benefit of
the Exchequer; the Minister may require the shareholders
to transfer their shares back to the Minister or to his or her
designee; upon the death of a shareholder, the shares
automatically vest in the Minister without the need for any
transfer of shares; the Minister appoints the directors of
SAT after consultation with the Minister of Finance; and
the directors hold office on terms and conditions
determined by the Minister who may remove them at any
time. Moreover, the legislation authorized the Minister to
guarantee payment by ICI itself under certain insurance
policies.
USX argues that the 1985 Act is irrelevant to ICAROM’s
status as an organ because the Act authorized the creation
36
and acquisition of SAT, not ICI, and the organ status of
SAT is not at issue here. We do not believe, however, that
the Supreme Court’s holding in Dole requires us to blind
ourselves to the true nature of the 1985 Act, thus
effectively extending Dole’s antitiering holding to the organ
prong of section 1603(b)(2). When the Irish Parliament
passed the 1985 Act, SAT was a holding company with no
purpose other than holding all but six shares of ICI. The
shares were held in trust for the Minister, who could hold
or dispose of them as he or she saw fit. Thus, although the
legislation nominally authorized only the acquisition of SAT,
in substance the transaction authorized the acquisition of
ICI, albeit indirectly.
In USX’s view, ICAROM is attempting to circumvent Dole
by relying on the 1985 Act under the organ prong. See USX
Reply Br. at 12. The Court’s decision in Dole, however,
turned on a discrete question of statutory interpretation.
The Court noted that the majority ownership prong of
section 1603(b)(2) “speaks of ownership,” and that the
prong’s insistence on ownership of “shares” demonstrated
“that Congress intended statutory coverage to turn on
formal corporate ownership.” Dole, 123 S.Ct. at 1660.
Because, under basic tenets of corporate law, a parent
corporation does not “own,” i.e., have legal title to, the
assets of its subsidiary, a parent company does not own
shares of a company held by its subsidiary. Id. at 1660-61.
As the Court noted, however, “[c]ontrol and ownership
. . . are distinct concepts.” Id. at 1661. The Court rejected
a control test under the majority ownership prong because
the statutory language of the majority ownership prong of
section 1603(b)(2) makes clear that ownership, not control,
is required. Id. at 1661-62. On the other hand, the organ
prong does not speak of ownership. We find that, although
Congress favored ownership over control in the majority
ownership prong, its use of the word “organ” suggests an
emphasis on control under the organ prong. Thus,
although the 1985 Act in terms authorized the acquisition
of SAT, not ICI, by that time SAT owned ICI and Dole does
not prohibit us from examining the substance of the
transaction, whereby full control of ICI effectively was
transferred to the government, even if legal title to the
37
shares of ICI was not.19 Because an act of Parliament
authorized the government’s assumption of control over ICI
and because of the extent of the government’s involvement
and authority in facilitating the transaction, this factor
weighs in favor of a finding of organ status.
b. The Purpose of ICAROM’s Activities
As just discussed, the acquisition of ICI served an
important governmental interest, namely protecting the
Irish insurance and banking industries from financial
disaster and maintaining stability in the Irish economy. To
be sure, as USX points out, at least since 1990 ICAROM’s
purpose has been solely to run off claims arising under old
policies, as would a private insolvent insurance company
engaged in winding down its business. This observation,
however, does not take into account the fact that the
government played an integral role in the 1990 transaction
that has led ICAROM to operate in this way. In 1990, the
administrator consulted with and obtained approval from
the government, which played an active role in the bidding
process, before disposing of the Irish Business and
positioning ICAROM to operate as a runoff company.
Furthermore, the administrator still consults with the
Minister regarding major decisions and gives regular,
detailed reports on the status of ICAROM. Thus, although
ICAROM is operating solely as a runoff company, it does so
only because the government positioned it to do so and only
under the supervision of the government, as the district
court found. See Juris. J.A. at 42, 44. Moreover, in doing
this it is carrying out the undertaking of the government
when it intervened in the first instance so that a public
financial crisis would be avoided. This factor therefore also
favors a finding of organ status.
c. The Degree of Supervision by the Government
As suggested by the above discussion, the government
has played and continues to play an active role in
19. For the same reason, we are able to consider ownership structure as
a factor unto itself under the organ prong without running afoul of Dole
even where that structure involves tiering.
38
supervising ICAROM’s operations though, as the district
court found, the government does not control them on a
day-to-day basis. Id. at 42. Rather, those responsibilities lie
with the administrator, subject only to approval of the High
Court, as would be the case for any private insurer in
administration under the 1983 Act. Nonetheless, the record
supports the district court’s finding that the government
exercises “a substantial level of oversight and control over
all major decisionmaking affecting Icarom’s ongoing
financial affairs.” Id. at 44. In addition to the reports and
consultation already discussed, the government was
involved heavily in the 1990 transaction, which positioned
ICAROM as a runoff company. ICAROM’s current
administrator testified that “in all aspects of dealing with
the government . . . they are very much the boss.” Id. at
1456. A representative of the Minister testified that the
Minister requires frequent consultation so that he or she
may “answer in Parliament as owners of . . . Icarom.” Id. at
1294. The government’s supervision of ICAROM is therefore
substantial, and this factor likewise cuts in favor of a
finding of organ status.
d. The Level of Government Financial Support
UXS argues that the government has not provided
financial support to ICAROM for its funding has come from
the ICF. Furthermore, the only cost to the government in
supporting ICAROM, according to USX, has been the
foregone interest on the 32 million loan from 1992. As the
district court found, however, this understanding of the
government’s financial relationship to ICAROM ignores the
fact that the government, despite not directly funding
ICAROM, has “arranged and provided financial support” for
ICAROM and, in doing so, has subjected itself to
substantial risk. Juris. J.A. at 42. USX’s observation that
the government never has had to make good on its
guarantees is beside the point. The government has
assured ICAROM’s solvency by indirectly lending it money
despite the risk of ICAROM not repaying. Furthermore, the
government has guaranteed substantial loans made by
private lenders to ICAROM.20 Finally, the government has
20. That the government guaranteed that the ICF would have sufficient
funds to satisfy any obligations under these loans rather than
39
lost the use of approximately 32 million in foregone
interest, which, as the district court noted, amounts to
approximately 9% of the total funding obtained to keep
ICAROM operating during the relevant time period. The risk
the government assumed in arranging financing for
ICAROM and its foregoing interest demonstrate that the
government provided significant financial support to
ICAROM. This factor therefore also weighs in favor of a
finding of organ status.
e. ICAROM’s Employment Policies
The government does not require ICAROM to hire public
employees, nor does it pay its employees’ salaries. Although
tending to ICAROM has “consumed a significant amount of
[the government’s] civil servants’ time and effort,” as the
district court found, this observation is of little relevance,
as it says nothing about the status of ICAROM’s employees.
More relevant is the fact that the government approved
both the current administrator before the High Court
appointed him and the current general manager before the
administrator appointed him. Nonetheless, Irish civil
servants do not work for ICAROM. ICAROM pays three full-
time employees who participate in the company’s private
pension plan, not a government plan. The employment
policies factor therefore weighs against a finding of organ
status.
f. Other Obligations and Privileges Under Irish Law
ICAROM has no special obligations or privileges under
Irish law and this factor weighs against a finding of organ
status as in some situations an organ would have such
obligations or privileges.
g. The Ownership Structure of ICAROM
Although the government does not directly own ICAROM,
it indirectly has complete control over ICAROM’s shares.
guaranteeing the loans directly is a distinction of little difference
inasmuch as in either case the government ultimately bears the risk of
default.
40
Six of ICAROM’s shares are held in trust for the Minister by
civil servants. SAT holds all other shares of ICAROM, and
the only two shareholders of SAT are also civil servants who
hold those shares in trust for the Minister.21 It is
unsurprising, then, that the Irish government believes, as it
apparently always has, that it is the owner of ICAROM. This
position has been stated in the Certificate of Ownership,
see Juris. J.A. at 1230-31 (“[O]n 15 March 1985 the
Government of Ireland decided to acquire ICI . . . . This
legislation . . . was enacted for the purpose of enabling
Ireland to own the shares of ICI through the Minister . . . .
[A]s successor to the then Minister for Industry, Trade,
Commerce and Tourism, I on behalf of Ireland, acquired
ownership of the company now called ICAROM PLC . . . .”),
as well as in the testimony of an employee of the Minister,
see id. at 1294 (“The position of Ireland is that we own
Icarom.”), and of the current administrator, see id. at 1342
(“[T]he Republic of Ireland owns ICAROM through SAT
. . . .”), and current general manager of ICAROM, see id. at
1327 (“Icarom is owned by the Irish government.”).
USX attempts to dismiss the significance of Ireland’s
indirect ownership of ICAROM by pointing out that the
administrator with the approval of the High Court, not the
Minister, in most respects runs ICAROM on a day-to-day
basis and that the Irish government never has claimed to
own PMPA/Primor, the only other insurer to be in
administration. This argument is entirely off the mark.
ICAROM does not argue that it is an organ because it is in
administration (and therefore must report to the
government through the High Court), but rather because
Ireland owns it for a purpose set forth by the Irish
government. Ireland never has owned or controlled
PMPA/Primor, either directly or indirectly, nor has it
claimed that PMPA/Primor serves any national interest.
Because Ireland has complete control over all shares of
ICAROM, albeit through a tiered arrangement involving civil
21. ICAROM points out that it is not uncommon for the Irish government
to provide for statutory ownership of state-owned corporations in this
manner.
41
servants who hold their interests in trust for the Minister,
this factor weighs in favor of a finding of organ status.22
3. Conclusion Under the Organ Prong of section
1603(b)(2)
Five factors therefore favor a finding of organ status,
while only two disfavor such a finding. Weighing these
factors qualitatively as well as quantitatively, we hold that
in these circumstances ICAROM clearly is an organ of the
Republic of Ireland for purposes of section 1603(b)(2). This
holding is consistent with cases from other jurisdictions
interpreting the organ prong of the section.
Significantly, in EOTT, in which ICAROM was a party, the
Court of Appeals for the Ninth Circuit declined to decide
whether it is an organ of Ireland but remanded the case to
the district court to do so. The court of appeals,
nevertheless, observed that certain characteristics favored a
finding that ICAROM was an organ of Ireland, for example,
Ireland did not acquire ICAROM for profit-making purposes,
the acquisition was accomplished to further the public
interest, Ireland placed its economic and political resources
behind ICI, the administrator reports to the Minister, SAT
is composed entirely of government employees serving at
the behest of the Minister, and ICAROM apparently has
been operated as a runoff company.23 257 F.3d at 998-99.
The only factors that the court identified as weighing
against a finding of organ status was the status of ICAROM
employees, none of whom are public servants, and
ICAROM’s status under Irish law insofar as ICAROM is
subject to suit in Ireland. This second factor should not be
considered part of the organ analysis, because an entity
must be a separate legal person to fall within the FSIA, and
Congress intended that the right to sue and be sued be one
factor to consider in deciding whether an entity is a
22. As discussed above, consideration of this factor is not inconsistent
with Dole, a case in which the Supreme Court was confronted with a
discrete question of statutory interpretation that does not arise under
the organ prong of section 1603(b)(2).
23. The court found the final point to be unclear from the record before
it, although it has been clarified in the record before us.
42
separate legal person.24 Thus, the court of appeals
effectively found that the only factor weighing against a
finding of organ status is the status of ICAROM employees.25
In EIE Guam Corp. v. Long Term Credit Bank of Japan,
Ltd., 322 F.3d 635, 640-41 (9th Cir. 2003), the same court
held that the Resolution and Collection Corporation
(“RCC”), a Japanese corporation in the business of
purchasing, administering, collecting, and disposing of
nonperforming loans purchased from failing institutions,
was an organ of the Japanese government. The court so
held even though RCC’s employees were not civil servants,
RCC was a private company engaged in a primarily
commercial concern, the government authorized 29 other
Japanese companies to collect distressed loans, and RCC
was not a public corporation, a designation reserved for
corporations established by the Japanese government by
special law as instruments for activities required by the
state. Id. The court found that such considerations were
outweighed by the fact that the Japanese Diet created the
RCC pursuant to legislation for the purpose of carrying out
“Japanese national policy related to revitalization of the
Japanese financial system.” Id. RCC also was funded by the
government, collected nonperforming loans at the request of
the Deposit Insurance Corporation of Japan (“DICJ”), and
engaged in certain unspecified activities that were exclusive
to RCC and DICJ. Id. Although this case may involve less
direct government financial support than was present in
EIE, it also appears to involve more supervision of the
entity’s activities as well as complete, although indirect,
control of the entity’s shares. Here, then, as in EIE, it is
appropriate to conclude that organ status is warranted.
24. See footnote 17, supra.
25. USX argues vigorously that ICAROM should be bound by a letter that
it wrote in EOTT to the court indicating that it was not an organ of
Ireland. We reject that argument as the court of appeals nevertheless
later considered the possibility that it was an organ and ICAROM
changed its position and argued for organ status. It seems to us that if
the court in which the letter was written did not regard it as binding on
ICAROM then neither should we. We are told by the briefs that EOTT
was settled after the remand to the district court so that the district
court did not determine ICAROM’s organ status in that litigation.
43
Kelly involved Al Furat Petroleum Company (“Al Furat”),
which was owned 50% by Syrian Petroleum Company
(“SPC”) (which was 100% owned by the Syrian government),
and otherwise owned by two private companies. 213 F.3d at
847. The Court of Appeals for the Fifth Circuit held that Al
Furat was an organ of the Syrian government because a
government decree created it for the national purpose of
exploring Syria’s mineral resources; SPC appointed four of
the eight Al Furat board members, generally filling those
positions with high-level Syrian government officials; and Al
Furat had the exclusive right to explore and develop Syria’s
identified petroleum reserves. Id. at 848. The Kelly court,
however, did not discuss any other factors. In this case,
Ireland acquired ICI to fulfill a national purpose, and
although ICAROM has an administrator rather than a
board, the current administrator was not appointed until
approved by the Minister. Furthermore, Ireland fully
controls the shares of ICAROM and has put itself at
substantial financial risk in financing ICAROM.
In Patrickson, however, the court held that two Israeli
chemical companies indirectly owned by the Israeli
government were not organs under the FSIA. 251 F.3d at
807-08.26 The court found that, although Israel created the
companies to exploit government-owned Dead Sea
resources and although the government had the right to
approve the appointment of directors and officers and
changes in capital structure, and despite the facts that the
companies were obliged to present an annual budget and
financial statement to various government ministries and
the government could constrain the use of the companies’
profits and the salaries of directors and officers, these
privileges were “not considerably different from the control
a majority shareholder would enjoy under American
corporate law.” Id. at 808. The companies were not run by
government appointees, their employees were not civil
servants, they were not wholly owned by the government,
they could sue and be sued, and they did not exercise any
regulatory authority. Id. The court therefore affirmed the
district court’s finding that the companies were
26. On the further appeal of the case in Dole the Supreme Court did not
consider whether the companies were organs of Israel.
44
“independent commercial enterprises, heavily regulated, but
acting to maximize profits rather than pursue public
objectives.” Id.
The companies in Patrickson must be distinguished from
ICAROM in certain important respects. First, Ireland
completely controls the shares of ICAROM. ICAROM’s
administrator, although approved by the High Court under
the 1983 Act, was the candidate supported by the Minister.
Most importantly, while the companies in Patrickson were
created for purposes of exploiting Dead Sea resources for
profit, a venture that would have been appropriate for
undertaking by a private company, Ireland indirectly
acquired ICAROM (which then still was ICI) in furtherance
of the important national and inherently public interest of
protecting the Irish insurance and banking industries from
financial disaster and to maintain stability in the Irish
economy. We are not aware of anything in the record to
support a conclusion that if the government had not
intervened to prevent ICI’s financial collapse that any
private entity would have done so. In this regard, it is
telling that when AIB recognized that ICI faced collapse it
turned to the government for help and not to the rest of the
banking and insurance industries.
Moreover, the government played an integral part in
arranging ICAROM’s financing and in positioning ICAROM
to continue as a runoff company, rather than as an ongoing
concern engaged in the sale of insurance policies for profit.
The government did all of this to protect the insurance and
banking industries for the benefit of the Irish economy.
Thus, while the relevant factors in Patrickson favored a
finding that the companies were commercial enterprises
involved in for-profit activities, the relevant factors suggest
in this case that Ireland acquired ICAROM to fulfill a
specific national purpose to avoid financial disruption, and
that ICAROM therefore engages in a public activity on
behalf of the Irish government. The district court thus did
not err in finding that ICAROM is an organ of the Republic
of Ireland for purposes of section 1603(b)(2) and therefore
the case properly was removed under section 1441(b) and
the district court was correct in denying the motions to
remand.
45
B. THE MERITS
In considering the merits of this case we exercise plenary
review both because this is an appeal from an order for
summary judgment, Northview Motors, Inc. v. Chrysler
Motors Corp., 227 F.3d 78, 87 (3d Cir. 2000), and because
we are concerned with the interpretation of insurance
policies. Medical Protective Co. v. Watkins, 198 F.3d 100,
103 (3d Cir. 1999). We have considered the district court’s
opinion on the motion for summary judgment and are in
full agreement with the result the court reached and cannot
add significantly to the opinion. Accordingly, we will affirm
the order for summary judgment without discussion except
to take note of the district court’s recognition of our opinion
in Bensalem Township v. International Surplus Lines
Insurance Co., 38 F.3d 1303, 1309 (3d Cir. 1994),
emphasizing the significance of the reasonable expectations
of the insured in ascertaining the meaning of an insurance
policy. USX, 99 F. Supp. 2d at 610. We think it plain that
USX could not reasonably have expected when it obtained
its insurance policies or at any later time to have the
coverage it sought in this case for the consequences of its
wrongful activities. While we are aware that USX obtained
and paid for broad coverage it should have recognized that
there was some limit to it and we regard its substantive
contentions, though complex, as not meritorious.
III. CONCLUSION
For the foregoing reasons we will affirm the orders of
April 1, 1996, March 22, 2000, and September 11, 2002.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit